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Pakistan takes more external loan
by Aftab Alexander Mughal
3 July 2015

In what is an indication of the government’s inability to introduce promised reforms and address bureaucratic snags, Pakistan has so far received only $4.3 billion – 57% of its annual projections – in foreign economic assistance.

Failure or delay in meeting conditions of foreign loans has resulted in the country receiving less than what it had initially projected, The Express Tribune (TET) reported on 27 June.

Due to less than anticipated economic assistance, many foreign-funded important projects will be delayed this year again, said the officials of the Ministry of Planning and Development. The non-materialisation of budgetary support from the Asian Development Bank and WB will increase the government’s reliance on domestic borrowings, which is already skyrocketing.

As of 12 June this year, the domestic budgetary borrowings increased to Rs894 billion – three times more than the comparative period of last year, according to State Bank of Pakistan.

According to the EAD, the ADB gave $412.4 million in loans from July through May, which was only 38% of the annual estimates of $1.1 billion. The ADB has delayed the approval of $400 million budgetary support for energy sector due to non-implementation of prior conditions. The WB also gave only $353 million or less than one-fifth of annual estimates of $1.9 billion. The WB too has postponed the approval of $500 million for energy sector reforms.

China has provided $846.1 million, which is slightly less than half of the annual estimates of $1.5 billion.

The Islamic Development Bank was the only multilateral institution that gave more than the annual estimates. The country received $990 million from the IDB, which was 171% of the annual projections. The IDB gave a one-year loan amounting to $864.7 million for crude oil imports, which is expensive and the government plans to get it rolled over to the new fiscal year, TET reported.

The United Kingdom was the only country that gave more than what it promised. The UK extended $255.7 million in grant to Pakistan in the outgoing fiscal year as against estimates of $245.7 million. In contrast to this, the United States gave only $95.2 million or 27% of the annual projections, according to the EAD.

A $1-billion loan raised through issuing a Sukuk bond is also part of $4.3 billion foreign economic assistance that Pakistan received from July through May.

On 27 June, the International Monetary Fund (IMF) has approved release of about 506 million dollars for Pakistan as part of three-year loan programme supported by an Extended Fund Facility (EFF).

The Executive Board of the International Monetary Fund (IMF) on 26 June completed the seventh review of Pakistan’s economic performance under a three-year program supported by an Extended Fund Facility (EFF) arrangement. The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 360 million (about US$506.4 million), bringing total disbursements under the arrangement to SDR 2.88 billion (about US$ 4.05 billion), according to IMF.

The World Bank approved US$188 million on 19 July to improve the reliability and safety of the Guddu Barrage and strengthen the Sindh Irrigation Department’s capacity to operate and manage the barrages.

Aftab Alexander Mughal is National Coordinator, Freedom from Debt Campaign – Pakistan

Aftab Alexander Mughal